Once again a cultural hot spot, this historic city is enticing visitors with a compelling mix of cutting-edge art, fashion, and architecture

Twenty years after the fall of the Berlin Wall, the German capital has rebuilt it—out of plastic. Some thousand towering dominos, decorated by students and youth groups, now dot a stretch of the former border between East and West. This month they will be ceremoniously toppled to honor the anniversary of the nation's reunification. That Berlin would transform the site of its previous division into an arena for celebration speaks to the city's dramatic rebirth. With the restoration of its world-class museums, arrival of cutting-edge galleries, and nonstop influx of young talent, Berlin has emerged as the art world's favorite hot spot, forever energized, but no longer haunted, by its storied past.

"Berlin is a strong, complicated city," says publishing impresario Angelika Taschen, who moved here from Los Angeles five years ago. "It is not always easy to understand, with its intense history and constant change. Still, that is what makes it such an exciting place to live."

Little could its 13th-century founders have anticipated what their twin trading posts, nestled on opposite banks of the Spree River, would become: the capital, successively, of the Kingdom of Prussia, the German Empire, the Weimar Republic, and the Third Reich. Upon Hitler's defeat, Allied powers carved Berlin into four zones of occupation—divisions which calcified into East and West. Up went the wall, until late 1989, when the severed city reunited. The occasion was observed with an improbable performance by Baywatch star David Hasselhoff, whose song "Looking for Freedom" had recently topped local charts.

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That concert, however memorable, hardly reflects the city's creative legacy. During the Weimar years Berlin became a laboratory for all things forward-thinking—from the theater of Bertolt Brecht to the functionalist designs of the Bauhaus—and has continued to attract intellectual, artistic, and oftentimes bacchanalian activity in the decades since. Here David Bowie shared an apartment with Iggy Pop, Jeffrey Eugenides completed his novel Middlesex, and Christo and Jeanne-Claude wrapped the capitol in aluminum-coated plastic.

Today a new wave of bohemians has taken up that torch. "Artists can actually afford to live here," explains Taschen, alluding to the capital's cheap rents, depressed economy, and double-digit unemployment rate. And live well at that. Hipsters who elsewhere would toil away at day jobs can instead spend their afternoons in cafés and their nights at the city's myriad theaters, concert halls, and clubs. "There is no money, but there are good ideas," Taschen jokes.

Among the struggling transplants are notables as well: Turner Prize–winning photographer Wolfgang Tillmans splits his time between the city and London, Brangelina did their stint, and Danish-Icelandic global art star Olafur Eliasson has his studio in a former factory.

"In a way Berlin has entered a second Weimar era," says Tobias Meyer, the German-born worldwide head of contemporary art at Sotheby's. "The city is very alive, with its young population, gallery scene, and liberal mayor. I always thought how cool it would be to have lived there in 1925, and today people can have that again—even if just for a weekend."

Nowhere is Berlin's creative spirit better captured than at Sammlung Boros, an exhibition space that opened last year inside a onetime Nazi bunker. The white elephant was bought in 2003 by German advertising tycoon Christian Boros, who converted it into a concrete showcase for pieces by the likes of Eliasson, Damien Hirst, and Elizabeth Peyton. Tours are available by advance appointment only. Think months, not weeks.

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More historically oriented art lovers can spend a day—or several—on Museum Island, home to treasures such as the Pergamon altar and the bust of Nefertiti. Conceived by Prussian royals in the early 19th century as a contemporary Acropolis, this complex has undergone a massive restoration to undo the damages of war and reorganize its collections, which were scattered between East and West. And just last month the Neues Museum reopened after an 11-year renovation by architect David Chipperfield.

"Each generation has gotten a new Berlin," observes German photographer Frank Thiel. "When the wall came down, the city's landscape began a profound transformation." The alterations to the environment have provided ample fodder for Thiel's own large-scale works: stunning images of scaffolding, peeling paint, and other urban ephemera. Several capture the recent demolition of the Palast der Republik, the glass-and-steel eyesore that housed the parliament of the German Democratic Republic (GDR). In its place, the city plans to rebuild the Hohenzollern city palace erased by the GDR from that very plot. Whether the government can find the half billion or so euros and army of stone carvers needed remains to be seen.

Re-creating a Baroque royal residence seems a surprising decision for a city associated with progressive design. However, Berlin as a whole continues to evolve in new and unexpected ways. In the past 20 years alone, down-and-out areas in the former GDR have been reborn as tony havens of chic—their vacant housing stock repopulated and storefronts converted into galleries and boutiques. Initially colonized by writers and artists during the 1970s and '80s, Prenzlauer Berg has most recently morphed from a gritty enclave into a residential oasis. Some locals pine for the grungy days of yore, but gentrification has its perks. A delicious array of ethnic food exists along Kastanienallee, a bustling thoroughfare nicknamed Casting Alley for its catwalkworthy residents. Try the naan pizza at W-Der Imbiss, then head down nearby Oderberger Strasse to Kauf Dich Glücklich, a charming ice-cream parlor whose mix of bright furniture is for sale. For more vintage finds, check out the flea market at nearby Mauerpark, or Kunst-a-Bunt, an antiques shop overlooking leafy Kollwitzplatz.

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Mitte (German for middle) has meanwhile retaken its rightful place as the heart of the city. Here restored landmarks line Unter den Linden—a grand boulevard stretching from the Brandenburg Gate to Museum Island—and Fernsehturm, the distinctive TV tower, looms over Alexanderplatz, East Berlin's onetime commercial center. To its northwest, the former Jewish quarter now teems with hip shops such as Bless, the cult fashion label's flagship store, and Apartment, a subterranean showroom filled with edgy clothing. Retail-weary wanderers can refuel at stylish restaurants before exploring the area's famous art scene, including neighborhood pioneers Galerie Eigen + Art and Kunst-Werke Berlin.

The culinary landscape has shifted as well. Berlin has long suffered from notoriously lackluster cuisine. "People don't necessarily come here for fine dining," concedes Tim Raue, Germany's 2007 chef of the year according to GaultMillau. Thanks in part to Raue, however, that stands to change. Last year he opened twin restaurants inside the historic Hotel Adlon Kempinski—the loungelike Uma, with a Japanese menu, and adjoining MA Tim Raue. "It's a mix of old-world Berlin and trendy Mitte," the chef says of his eponymous eatery.

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Of course, the art industry remains the driving force behind the city's renewal, with galleries popping up on every corner—from the shadows of the modern Hauptbahnhof railway station (where Haunch of Venison has opened an outpost) to Checkpoint Charlie. The latest crop can be found along the monumental Stalinist boulevard Karl-Marx-Allee, including Krome Gallery and Capitain Petzel.

Strolling that street today, it's easy to forget demonstrations of military might were once held here. History, however, forms the foundation of the city's ever-evolving identity, mixing easily with the creativity for which the capital is now known. The combination, as Cabaret heroine and iconic Berliner Sally Bowles might say, is perfectly marvelous.

Climb the Reichstag. The German parliament, with its glittering dome by Norman Foster, is a required stop for its panoramic views and ingenious melding of old and new (Platz der Republik 1; bundestag.de).

Gallery-hop. New ones keep cropping up in every corner of the city, from Karl-Marx-Allee to Checkpoint Charlie, but the highest concentration remains in Mitte.

Break on through. Twenty years after its fall, a few stretches of the Berlin Wall still stand. The longest is in Friedrichshain at East Side Gallery (Mühlenstrasse).

Explore Museum Island. The UNESCO World Heritage site is home to five institutions (including the newly opened Neues Museum), with treasures from ancient times to the 19th century. The Pergamon altar is especially awe-inspiring.

Walk Unter den Linden. Stretching from the Brandenburg Gate to the vacant site of what was the Palast der Republik, this historic boulevard is dotted with stunning neoclassical, Baroque, and rococo buildings.

Let the music play. With three state-funded opera houses and the legendary Hans Scharoun–designed Philharmonie concert hall, Berlin is a classical-music-lover's paradise.

WHAT TO SEE

Gemäldegalerie, Matthäikirchplatz 8, 30-266-42-3040; smb.spk-berlin.de: Rubens, Velázquez, and Titian are only a few of the many Old Masters with works in this standout collection.

Memorial to the Murdered Jews of Europe, Cora-Berliner-Strasse 1, 30-2639-4336; holocaust-mahnmal.de: Architect Peter Eisenman's sobering and sculptural tribute to victims of the Holocaust.

Neue Nationalgalerie, Potsdamer Strasse 50, 30-266-42-3040; neue-nationalgalerie.de: Designed by Mies van der Rohe, this glass-and-black-metal box is home to modern masterpieces by the likes of Kandinsky, Kirchner, and Klee.

Oliv, Münzstrasse 8, 30-8920-6540; oliv-cafe.de: Tucked among Mitte's many boutiques, this café is the perfect place to stop for quiche or a quick cappuccino.

Paris Bar, Kantstrasse 152, 30-313-8052; parisbar.net: Original artwork by Martin Kippenberger and fascinating ephemera fill the walls of this storied brasserie, a beloved hangout for generations of artists, writers, and ex-pats.

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